Where Will HFCL be in the Next 3 Years?

India's push for infrastructure development-led by 5G rollouts and broadband expansion-has supported several related sectors.

In addition, increasing domestic defence manufacturing has also benefited many sectors. While various companies serve different parts of the ecosystem, many have benefited from this trend.

HFCL serves not just telecom, but also defence and systems integration. The company supplies globally to more than 60 countries, serving over 80 clients.

As India's top optical fiber cable supplier, well-positioned to profit from the ongoing infrastructure growth.

So, how is HFCL placed for the next three years?

Let's take a look...

HFCL Business Performance

HFCL operates in three high-growth areas: telecommunications, defence, and systems integration.

In the telecommunications sector, the company manufactures and supplies optical fiber cables, telecommunications and networking products, as well as passive connectivity solutions.

In the defence sector, it supplies ground and coastal surveillance radars, electro-optics, electronic fuses, tactical cables, and wire harnesses.

Additionally, it executes and maintains large-scale telecommunication and defence communication projects in system integration.

The company's revenue in FY25 fell 9% to Rs 40.6 billion (bn) compared to the previous year. Lower demand for optical fiber cables and slower customer purchases contributed to the decline in revenue.

Notably, the revenue contribution from private players declined to 65% (from 74% in FY24), while the government's share increased to 35%. This also impacted its margin.

The company's margin declined 12.5%, mainly due to newly launched telecom products. With lower revenue and margins, net profit fell sharply by 49% to Rs 1.7 bn.

On the positive side, HFCL's export revenue has risen after a slowdown.

After reaching an all-time high of Rs 17.2 bn in FY23, export revenue fell to Rs 11.2 bn in FY24. However, this is turning around as export revenue grew 9% to Rs 12.2 bn in FY25.

Financial Snapshot (FY25)

Particulars	FY25	FY24	Growth (%)
Revenue (Rs bn)	40.6	44.6	9
Margin (%)	12.5	15.3
Net Profit (Rs bn)	173.3	337.5	49
Revenue Share from Private Customers (%)	65	74	NA
Export Revenue Share (Rs bn)	12.2	11.2	9%
Product-Led Revenue (%)	61	39	NA

Source: HFCL Q4FY25 Investor Presentation

A positive aspect is that HFCL is shifting towards higher-margin product-based revenues, from a lower-margin project-led revenue model.

In FY25, 61% of revenues came from product-based revenues (from 42% in FY24), while lower-margin project-based revenues declined to 39%. HFCL aims to eliminate low-margin turnkey projects and focus on more scalable, high-value product offerings, thereby enhancing margins and ensuring revenue growth.

The company's order book stands at Rs 99.7 bn, providing revenue visibility of over two years. 84.4% of orders are from the government sector, while 15.6% of orders are from the private sector. Category-wise, 41% of orders are for network services, 37% for operations and maintenance, and 22% for products.

The FY25 performance was challenging, but the company expects 25-30% revenue growth in FY26. The management anticipates significant revenue growth from the optical fiber business, driven by rising demand from both domestic and global customers.

The demand is evident from the capacity utilization of its plants. The fiber manufacturing plant capacity utilisation stood at 45%. However, it's now working at full capacity.

The company's defense facility is also expected to contribute to revenue starting from the second quarter of this financial year.

HFCL is also developing a drone detection radar, which is expected to be put into production in the current financial year.

Within the defense business, the company has won orders worth Rs 1 bn, from the Indian Army, and more is expected to come.

The Defence Research and Development Organisation has also approved technology transfer to HFCL for two critical defence products.

What Next?

In the telecom sector, HFCL is developing global variants of Wi-Fi 6 and Wi-Fi 7 access point versions, a new 4 Gbps (gigabits per second) unlicensed band radio, variants of internet protocol and multiprotocol label switching routers, and outdoor fixed wireless access customer premises equipment.

It's also reducing dependence on external suppliers for the manufacturing of optical fiber cables.

The company plans to more than double its optical fiber capacity from the current 14 million fibre kilometers (m fkm) per annum to 33.9 m fkm per annum.

On the other hand, optical fiber capacity is expected to expand from 25 m fkm to 35 m fkm per annum. The in-house production facility ensures high-quality products and also gives better margins.

In the defence segment, the company is developing software-defined radios, drone detection radars, and multi-mode hand grenades.

HFCL also provides optical fiber networking equipment and solutions to the data center and artificial infrastructure industry. According to Network World, data centres will require capital expenditure of US$ 1.1 trillion (tn) by FY29.

HFCL is well-positioned to capitalise on this opportunity given its capacity expansion. The company expects strong demand visibility, improved margins, and long-term structural demand from the data center business.

Additionally, it has focused on high-end products, which offer higher margins, thereby improving the revenue mix.

Geographically, the company plans to diversify and tap new markets. It aims to collaborate with international partners to access key markets in Europe, Southeast Asia, and the Middle East. Here, too, the objective is to gain revenue stability and higher margins.

There are also significant opportunities in the engineering, procurement, and construction division. Bharat Net Phase III presents an opportunity of Rs 200 bn across eight states, with four states ready to rebid, offering an additional Rs 100 bn.

HFCL could benefit from BSNL's CPAN network expansion too. This will include various types of enterprise routers, as well as BSNL's OTN expansion and the Bharat Net Central NOC (CNOC) project, each costing about Rs 8 bn. BSNL is also expected to award contracts worth Rs 70-80 bn for 4G towers.

Within the optical fiber cable segment, the current nationwide optical fiber cable ring project, including regional sub-rings, is currently under evaluation for the Indian Railways. The project is expected to require 20,000-30,000 km of high-quality optical fiber cable.

Additionally, HFCL also sees opportunities in the water infrastructure sector in the coming financial years. This is expected to be driven by government initiatives, such as the Jal Jeevan Project.

Conclusion

HFCL's diversified presence across telecom, defence, and digital infrastructure positions it well for the next phase of India's tech-led growth.

With continued investments in product innovation and global expansion, the company is strengthening its competitive edge. As digital adoption accelerates, HFCL can tap into a multi-year demand cycle.

However, instead of relying solely on hype, it is necessary to carefully analyze the company's fundamentals, including its financial performance, corporate governance practices, and growth strategies.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...